The Home Equity Theft Reporter

Welcome to The Home Equity Theft Reporter, a blog dedicated to informing the consumer public and the legal profession about Home Equity Theft issues. This blog will consist of information describing the various forms of Home Equity Theft and links to news reports & other informational sources from throughout the country about the victims of Home Equity Theft and what government authorities and others are doing about it.

Saturday, April 07, 2012

Lndlord's 'Stand Your Ground' Claim Fails, Gets Life For Killing Father Of 5 Reluctant To Pay Rent; Bank About To Take Over F'closed Home, Victim Told

In Miami, Florida, The Miami Herald reports:

With his claim of self-defense already rejected by a jury — and Florida’s Stand Your Ground law deemed irrelevant by a judge — Julian Gonzalez was well-assured of being sentenced to a lengthy jail sentence on Thursday.

The landlord of a North Miami Beach rental home had two years earlier fatally shot a tenant in a dispute over past due rent. That action led to a second-degree murder conviction, and a minimum mandatory prison term of 25 years. The only question before Miami-Dade Circuit Judge Beth Bloom was whether to levy the maximum penalty of life imprisonment. Bloom ultimately decided to do exactly that — choosing a punishment that the family of Gonzalez’s victim, 25-year-old Vladimir Santos, had fervently pleaded for.

“My one and only son,” Santos’ mother, Connie Garcia, told the judge. “He had a great personality, a great sense of humor, always had a smile on his face.”

Florida’s highly controversial Stand Your Ground law — which is at the center of the Sanford shooting of 17-year-old Trayvon Martin — was not applied in this case for two key reasons: Gonzalez, despite being a landlord, did not have a legal entitlement to be at his tenant’s property, and perhaps more importantly, there was no credible evidence that Gonzalez was ever in any danger.

In addition to his grieving mother, Santos left behind a wife and four young children — three boys and one girl. Wife Maria Rivera was nine months pregnant when the shooting took place, and gave birth to their daughter eight days after Santos died.

***

In front of a jury earlier this year, Gonzalez unsuccessfully tried to cast the shooting as an act of self-defense. Gonzalez had visited Santos demanding the tenant either pay rent or move out, but Santos refused to do either.

The home was in foreclosure, prosecutors say, and Santos was reluctant to pay rent when the bank had told him it would soon be taking over the property. Gonzalez testified that he only shot because it appeared Santos was reaching for a gun. Police, however, never found a gun in the Santos home, and witnesses contradicted Gonzalez’s version of events.

Tenants In Foreclosed Million $ Home Used As Rooming House Score Moving Cash In Negotiated Settlement With Bank

In San Jose, California, the San Jose Mercury News reports:

Nine remaining tenants in a foreclosed million-dollar San Jose home have been given until May 1 to move out, under an agreement that also gives them $1,500 each to cover rent deposits and moving expenses.

The agreement with Bank of America, which foreclosed on the foothills home last November, was filed in San Jose Superior Court Thursday. The bank had no comment. At one point, as many as 15 renters lived in the home, which its former owner continued to rent out after the foreclosure.

"The tenants did nothing wrong," said Deborah Thrope, a lawyer with the nonprofit Law Foundation of Silicon Valley.(1) "It's not your fault if you move into a house where the person hasn't paid their mortgage," she said. The Law Foundation represented the tenants in negotiations with the bank.

Neighbors in the upscale neighborhood complained of noise, and San Jose police said they had responded 16 times since September to resolve disputes and disturbances at the house.

The tenants said the former owner didn't tell them the home was foreclosed. They said they only learned that after moving in and discovering an eviction notice from the bank. Thrope said the foundation frequently receives requests for help from tenants facing eviction due to a foreclosure.

Neighbors in the northwest Orange County community of Rose Point noticed something unusual going on at the vacant, foreclosed house on Rywood Drive — a Rooms To Go truck was unloading furniture there.

Community coordinator Rebekah Dulberg knew the house was under contract and could not understand why someone would be moving in before the sale had closed. Delving into the matter with law enforcement, other homeowners and a real-estate broker, Dulberg uncovered a rental scam at that house and another one nearby.

***

No one knows how pervasive the rental hoax has become in a state beleaguered by a shadow inventory of foreclosed-and-vacant houses. Utilities report an increase in sham accounts for getting water turned on, and law enforcement has made numerous arrests in other parts of the state. [...] One factor that has made it easier for con artists to pass off these rental houses as their own is that they are able to get the utilities turned on, Dulberg said.

Among examples of the crime in this part of the state: A Polk County man was charged with an organized scheme to defraud using manufactured leases. Charges were filed against a 37-year-old Pasco County man who was operating a foreclosure-prevention business. And a Hillsborough County man recently pleaded guilty to organized fraud, theft and burglary for breaking into houses and moving tenants into them.

55+ Mobile Home Community/Co-Op In Foreclosure Leaves 250 Elderly Residents In Fear Of Boot; Some May Have Nowhere To Go

In Deerfield Beach, Florida the South Florida Sun Sentinel reports:

The Tidewater Estates mobile home park in Deerfield Beach is facing foreclosure, and the roughly 250 residents fear for their future. "There are mornings I'll just cry because I think, 'What's going to happen?'" said Bonnie Alexander, 69. "We don't know where we're going to go."

The 55-and-over community, near Hillsboro Boulevard and Military Trail, is a close-knit group that holds pool parties, shuffleboard contests and weekly Bingo and poker games. When Tidewater Estates' owner announced plans to sell to a developer in 2005, residents scrambled to form a co-op and take out mortgages to buy the park for $11.3 million. By 2009, though, the co-op struggled to keep up with the $60,000 monthly payments and defaulted on the loan the following year.

***

Ginny Schriner said the co-op wants to pay back the mortgage debt, but it needs the bank to work with the residents through a difficult period. "We all grew up in an era where if we gave our word, we would take care of it," said Schriner, 72. "We don't want to walk away from the mortgage. We all feel that way."

Madelyn Martin, 95, has lived at Tidewater since 1995. If the bank forecloses on the park, she said she'd have to live with family members, even though she prefers to remain independent.

"You don't want to live off your kids," said Anna McAnespie, 66, another longtime resident. Roney Alexander, Bonnie's 71-year-old husband, said he doesn't understand why more lenders aren't working with struggling homeowners when taxpayer money helped stabilize the banking industry during the financial crisis of 2008. "We bailed their butts out," he said. "When we get in trouble, who bails us out?"

Attorneys tell 23 ABC that tenant lockouts have become a major problem since the foreclosure crisis hit. Tami Knopf said she came home two weeks ago to find she'd been locked out due to a foreclosure. "This caught me with my pants down, basically," said Knopf.

Knopf claims she's known since November that the home she was renting was in the process of being foreclosed. "So we were moving things out in little increments. I figured I had all the time it took till I got served or until I got all my stuff out," said Knopf.

She claims she was applying for cash for keys with Altisource and was told she'd have until April 10 to vacate when someone changed her locks and even glued the keyholes with her property still inside the home. "I received no money for cash for keys, no notice to vacate the premises, no three-day or 30-day notice, neither from landlady or this company," said Knopf. Her belongings have since been cleared out and Knopf says she feels violated.

"There's such an injustice going on. I don't know who has done this to me. They're doing it to secure their assets. Those aren't their assets in that home -- those were my assets," said Knopf.

Some renters in Kissimmee signed leases that they thought locked them in at a great price. But WFTV investigative reporter George Spencer discovered that when their original landlord went into foreclosure, their below-market rates opened them up to eviction.

Louis Barrueto disassembled his family's dining room table as his wife packed boxes. Next door, neighbors loaded up a U-Haul. The two families and others in the Oakwater community insist they are being blindsided by evictions.

“It's hard to adjust to. I'm taking medication for my blood pressure, which I've never had a problem with,” said renter Veronica Barrueto. The Barruetos moved into the community in November. Their lease promises rent of $750 dollars a month for a three-bedroom unit. They saw it as a great deal for their struggling family. Then-owners at Oakwater, the Apostolou family, leased similar great deals to other tenants, perhaps dozens.

The problem was that the bank would soon foreclose on the Apostolous family, and a new owner would step in. Some residents said they came home to find that their water had been cut off. Others said they walked right up to their front doors and found the locks had been changed.

An attorney for the new owner, Orlando Condo Investments, said many tenants simply were not paying. Residents refute that.

Either way, the low rents that attracted them now left them open to immediate eviction. Ninety-day move-out notices under the Protecting Tenants at Foreclosure Act do not apply when rents are substantially less than fair-market.

WFTV tried to ask Nick Apostolou why he, with a pending foreclosure, leased to the tenants, but we were told he left when we approached.

Dozens Of Renters May Face Boot, Fear Worst After Landlord's Foreclosure Notice Spotted In Local Paper

In Superior, Wisconsin, WDIO-TV Channel 10/13 reports:

Dozens of families are in housing limbo because a large rental property company is facing the foreclosure of all of its buildings. Even though some of these tenants always paid the rent they could be homeless before the summer.

"I never even thought of the word foreclosure," said Sue Wallen, a lifelong renter from Superior. Wallen, her husband and two years have been living in a rental house on North 20th Street for five years. They wanted to make it their permanent home until they saw their address listed in the foreclosure section of the local paper.

***

The Wallen's are one of dozens families facing the same problem because Great Lake Properties and Investments is facing a foreclosure on all their properties. According to court documents Great Lakes Investments and Properties owns 13 buildings with a total of 25 units, all of which are facing foreclosure. Wallen thinks some of the tenants may not even know because the Wallen's didn't know.

A McDonough man duped several renters out of thousands of dollars, according to authorities. Police say 35-year-old Joel House leased two homes to at least seven victims, collecting some $10,000 in deposits. “He was awful anxious to get money,” said Ray Radford. “I gave him $1,600.”

Radford says he signed a lease for an $800 a month four bedroom, three bathroom home. He said his family moved in last month. But in the meantime, police say, House was also leasing to other families.

“He would accept a partial deposit one day and turn around the next day and accept a partial deposit from another family for the same residence,” said McDonough Police Detective R. Gardner. Gardner says House leased a home in Ellenwood and another house in Stockbridge to at least seven families. Police say House worked for the home’s owner, who was unaware of the scam.

House is facing three counts of first degree forgery and three counts of theft by deception. Police say House lured victims through Craigslist ads. One family came from California. “They come here, moved here but when they come here they found out we were here and they were from California,” said Radford. The Radfords say they're now moving because the home is in foreclosure.

An Albuquerque man accused of illegally assuming ownership of several homes and renting them out is now in trouble for allegedly having stolen items taken from at least one of the properties.

A search warrant led police to the items after Shaun Anaya, 35, was arrested on March 13 for allegedly trying to cash altered money orders at a check-cashing business on Coors NW. Anaya told police the money orders were from tenant who rents one of his homes. He said he did not know exactly who they were from because he rents out a lot of properties through his company, Mt. West Investment Group LLC, which he said he runs from his home on San Patricio SW, according to a criminal complaint filed in Bernalillo County Metropolitan Court. He said he had to check his records to determine who wrote the money orders.

Police were already working on other cases involving Anaya, who also owns Olive Tree Property Management, according to a search warrant affidavit.

***

Police were contacted by several people about Anaya allegedly illegally assuming ownership of several properties that he had no legal claim over and renting out these properties. The renters were forced to vacate the properties when the fraud was discovered. Anaya would enter the residences and change the locks before renting them, the affidavit states.

Most of the properties Anaya would take possession of were in the process of foreclosure and located in southwest and northwest Albuquerque. In one case, Anaya impersonated the homeowner and signed a lease agreement for a house that was being sold, according to the affidavit. The parties were due to close on the property within a month from the time that Anaya leased the residence, the affidavit reads.

Friday, April 06, 2012

Ohio Supreme Court Hears Arguments On Whether Banksters Need To Have Standing At Time Of Filing Foreclosure Action

In Columbus, Ohio, The Columbus Dispatch reports:

Mortgage giant Freddie Mac’s decision to foreclose on a Dayton-area house without having all the necessary paperwork could have implications across Ohio and possibly the country.

The state Supreme Court [Wednesday] weighed whether a bank or mortgage company can file a foreclosure lawsuit in Ohio without having proof at the time that it actually holds the mortgage or note. The practice is a byproduct of the real-estate boom days when loans were repackaged, bundled and sold off, resulting in sloppy paperwork and other problems.

Banks and mortgage arms such as Freddie Mac and Fannie Mae — which undertook a flood of foreclosure filings when the economy went south — often did so without having the proper documents on hand.

Typically in foreclosure proceedings, banks want to speed up what can be a costly process. Homeowners try to slow it down. “We find these two interests in conflict in this case,” Justice Robert R. Cupp said.

The high court is involved because Ohio appellate courts have issued conflicting decisions on whether a bank needs all the paperwork in order initially or can “catch up” by filing it before the judge rules.

Justice Yvette McGee Brown questioned why the high court should soften the requirement that a party have legal standing before filing suit, noting that banks are known to strictly enforce their own rules on customers. “Why should this court find a more relaxed rule for Freddie Mac than Freddie Mac would otherwise give to its customers?” she asked.

McGee Brown later wondered why Freddie Mac simply did not wait to sue until it had the note and mortgage in hand. “There was no urgency. The house wasn’t simply going to get up and leave,” she said.

In November 2006, Duane and Julie Schwartzwald bought a house in Xenia for $335,000, securing a $251,250 loan. After Duane Schwartzwald lost his job, they moved to Indiana for a new job and put their home on the market, according to a ruling from the 2nd District Court of Appeals that went against the couple.

They no longer could make the mortgage payments by early 2009 and spoke to Wells Fargo about a loan modification or short sale. They had a short-sale buyer, with the closing set for June 2009, but Freddie Mac filed a foreclosure suit in April.

In its suit, Freddie Mac said it was the “holder” of the promissory note but did not attach a copy of the note. It also said it had obtained an assignment of the mortgage but did not attach documentation of the assignment. Those documents were not filed until later in the year.

Freddie Mac attorney Scott King said to have the legal right to sue, a plaintiff just needs to allege facts giving the court jurisdiction to rule. Down the line, he said, a bank can back up its suit with the necessary documents.

Andrew Engle, the Schwartzwalds’ attorney, said “it’s ironic that one of the biggest actors in the U.S. residential mortgage market is coming in and asking the court to loosen the standards, to deviate from what this court has repeatedly said.”

The case — which drew friend-of-the-court briefs from a host of legal-aid and homeowner-rights groups — could have implications nationally because few state supreme courts have ruled on the issue.

New York is expanding a national investigation and scheduled public hearings into so-called forced-placed insurance that add costs to homeowners seeking to avoid foreclosure.

Banks and mortgage holders take out force-placed insurance when a homeowner misses a mortgage payment or fails to maintain homeowners insurance required by the mortgage. But state Financial Services Superintendent Benjamin Lawsky tells The Associated Press that the high cost of forced-placed insurance adds to struggling homeowners' debt and makes escape from foreclosure even more difficult.

Lawsky also sees questionable profits and possible conflicts of interest. He's targeting several banks and mortgage service companies nationwide and is demanding justification for premiums.

Lawsky says that even though the insurance costs homeowners more, it often provides less protection for the consumer while protecting the lender's interest.

A bakery looking to expand is eyeing a former meat processing plant as a new location, once the city completes a tax foreclosure on the building's bankrupt owners.

The owners of The Cookie Factory, which has operated from an 8,000-square-foot plant on Congress Street since 2006, want to buy the former Levonian Brothers plant at 41-61 River St., which has been shuttered since 2009. However, problems with unpaid property taxes left by the former owners have slowed city efforts to foreclose on the property and then sell it.

The city's initial attempt to foreclose on this property and more than 120 others in November was thrown out by Rensselaer County Court Judge Andrew Ceresia because the legal notice gave an incorrect deadline for payment of the delinquent taxes, which now total more than $805,000, said Mike Fraser, a spokesman for Troy Mayor Lou Rosamilia,

"This was a major misstep that set us back," said Fraser. "We want to keep this company in Troy." He said the city expects to issue another foreclosure notice on Friday, which would allow the city to foreclose if taxes are not paid within 90 days.

Cookie Factory co-owner Chris Alberino said Tuesday the company badly needs extra space to handle its increased production. Once it gets more room, the company expects to hire 10 more workers to help meet demand for its cookies and specialty baked goods, Alberino said. "We are just going through the process with the city, waiting" said Alberino. "We were basically ready yesterday." Alberino, who owns the business with his brother, Joe, said the 28,000-square-foot former meat processing plant is "the next best thing to building a new building. It is set up for how we would use it."

However, about $350,000 would be needed to renovate the building, which would house all baking operations. Retail sales and cake decorating would remain at the original plant. Alberino said the company is experiencing a sales surge from the recent introduction of a two-pack for its specialty fudge cookie. "Once we get more space, we plan to add a second shift," he said.

Levonian Brothers Inc. filed for Chapter 7 bankruptcy liquidation in July 2010 amidt $4 million in unpaid taxes, bills and other debts. The bankruptcy case was settled in December 2010, but bankruptcy documents did not indicate any transfer of Levonian's real estate, equipment or other assets.

In February, Local 1 of the United Food and Commercial Workers union won an $803,000 judgment against the company for failing to make contributions to the employee pension fund through September 2011.

Bank of America has sold collections agencies rights to sue over credit card debts that it has privately noted were potentially inaccurate or already repaid.

***

At Bank of America, records declared unreliable yet sold to CACH were used to file thousands of lawsuits against consumers, according to a review of hundreds of cases in the state courts where collection suits are typically filed. The overwhelming majority of cases end in default judgments, which are awarded to creditors when borrowers don't show up to contest the claims made against them.

In cases where debtors do challenge collections demands in court, the original bank-creditor must testify about the documentation supporting the claims. In several such instances, people identified as Bank of America employees have submitted affidavits attesting to the validity of debts sold by the bank to collections firms.

Even though Bank of America previously disavowed "the accuracy of the sums shown as the current balance," the sworn statements vouch for the borrowers' debts down to the penny and declare that the bank's "computerized and hard copy records" back the claims.

There are other possible discrepancies, as well: the affidavits state that B of A "has no further interest in this account for any purpose," while the sales contracts reference a "revenue sharing plan."

The prospect that B of A was selling unreliable credit card debts did not deter CACH from buying them. A subsidiary of SquareTwo Financial, CACH does not collect debts itself. Instead, it operates like a restaurant franchiser, acquiring rights to the delinquent debts that are the raw materials of the collections business. It then works with law firms around the country that do the actual collections work, providing them with debt files, court witnesses and other services.

In thousands of cases in state courts, CACH has appended a single page from its purchase agreements with Bank of America attesting to its ownership of delinquent credit card debt.

CACH has omitted from many such filings the more than 30 additional pages where Bank of America disclaims the accuracy of its debt records. Even so, attorneys affiliated with CACH have cited the reliability of Bank of America's records as the foundation for their collections lawsuits.(1)

Thursday, April 05, 2012

Oklahoma High Court Means Business In Booting Back Foreclosure Judgments Based On Unindorsed Notes, Dubious Assignments, Lack Of Standing

Questions surrounding the use of unindorsed promissory notes and dubious assignments in foreclosure actions have recently led the Oklahoma Supreme Court to kick several cases back to the lower court for a closer look as to whether the foreclosing banksters had standing at the time they initially brought their lawsuits.

The following two excerpts, which appear in some of the cases, is generally representative of at least a part of the central problem that led the Oklahoma high court to give the banksters' cases the boot:

To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717. Being a person entitled to enforce the note is an essential requirement to initiate a foreclosure lawsuit. In the present case, there is a question of fact as to when Appellee became a holder, and thus, a person entitled to enforce the note. Therefore, summary judgment is not appropriate. If Deutsche Bank became a person entitled to enforce the note as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party. We reverse the granting of summary judgment by the trial court and remand back for further determinations as to when Appellee acquired its interest in the note.

***

It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and to have the proper supporting documentation in hand when filing suit, showing the history of the note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to12A O.S. 2001, § 3-309or 12A O.S. 2001, § 3-418.

Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency. This Court's decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

In each case, the high court remanded the matter back to the trial court for further determination as to if and when the bankster became a person entitled to enforce the promissory note.

See also, HSBC Bank USA v. Lyon, 2012 OK 10 (February 14, 2012) which, in affirming a summary judgment in favor of a foreclosing lender, the Oklahoma Supreme Court reinforces the proposition that, at least in Oklahoma, the only way to cure a foreclosure action where the foreclosing party cannot prove it was entitled to enforce the promissory note prior to filing the action is to dismiss the proceeding and then file an amended petition with the proper proof (ie. a properly indorsed note and a properly assigned mortgage attached thereto):

In the present case, Appellee has presented evidence of an indorsed-in-blank note. Appellee must prove it is the holder of the note or the nonholder in possession who has the rights of a holder prior to the filing of the foreclosure proceeding.

The trial court's actions have cured any deficiencies. The dismissal of the original action and the first Motion for Summary Judgment filed therein, and requiring the refiling of the second amended petition with the attached note demonstrating a proper indorsement, effectively cured any lack of standing in the initial filing. Thus, by the filing of the second amended petition with a properly indorsed note and a properly assigned mortgage attached thereto, HSBC has shown it was a person entitled to enforce the instrument as the holder of the note. 12A O.S. 2001 §3-301.

In another reversal of a trial court ruling in a foreclosure sale, an Ohio appeals court found that a bankster who failed, at the time of the filing of the lawsuit, to attach an assignment of the promissory note it was attempting to collect, and who otherwise failed to identify the date it obtained possession of the note or explain why it had been unable to produce evidence of the assignment failed to establish itself as a real party in interest. Accordingly, it was not entitled to summary judgment in this case.

A Florida appeals court recently affirmed a lower court ruling nullifying a foreclosure sale where the pre-sale notice was not published in a local newspaper as required by state law.(1) The sale, pursuant to a foreclosure judgment in the amount of $280,982.34, proceeded and yielded a high bid of $6,500 from a private investor.

The trial court's final judgment of foreclosure required the clerk of the court to sell the property by electronic sale to the highest bidder for cash "in accordance with section 45.031, Florida Statutes." Section 45.031, Florida Statutes, requires that notice of sale "be published once a week for 2 consecutive weeks in a newspaper of general circulation." §45.031(2), Fla. Stat. (2011).

It is undisputed that in this case the notice of sale was not published as required by statute. Castelo argues that the statute is silent as to what happens if the notice of sale is not published. A plain reading of the statute, however, supports the trial court's interpretation that a foreclosure sale should not be confirmed if the notice of sale was not published.

Subsection four of the statute dictates that after the sale of the property, the clerk of the court shall promptly file a certificate of sale. § 45.031(4). The statute, however, requires that as part of the certificate of sale, the clerk must certify that the "notice of public sale of the property described in the order or final judgment was published in . . . a newspaper circulated in" the county where the property is located. Id.

Thus, if the clerk cannot certify that the notice of sale was published, the clerk should not issue the certificate of sale. Without a certificate of sale, the clerk of the court lacked authority to issue a certificate of title and thereby confirm the sale. § 45.031(5), (6).

In summary, the clerk of the court acted properly in refusing to issue a certificate of sale because the clerk could not certify that the notice of sale was published prior to the public sale. The trial court, therefore, correctly denied Castelo's motion to compel the clerk to do so. We also find that the trial court did not abuse its discretion by refusing to confirm the foreclosure sale.

Wednesday, April 04, 2012

M.D. Sass Investors Services Inc., a closely held manager of more than $5 billion, and a unit of U.S. Bancorp (USB) were sued in a racketeering lawsuit claiming they helped to rig New Jersey municipal tax lien auctions for a decade.

The complaint by homeowner Raymond V. Contarino Jr. was filed March 30 against New York-based M.D. Sass, U.S. Bank, and four of six individuals who pleaded guilty in a U.S. antitrust investigation of rigged lien sales in New Jersey. It claims they engaged in a “cynical conspiracy” to eliminate competition at auctions.

Contarino seeks to proceed in a group, or class-action, lawsuit for those “subjected to artificially inflated rates of interest on their tax liens, and, in some instances, a loss of their real property through tax lien foreclosure,” according to the complaint filed in federal court in Camden, New Jersey.

Six people admitted in guilty pleas that they colluded at auctions where bidding for liens began at 18 percent and failed to move downward. Bidders won the right to charge 18 percent interest to property owners, and additional penalties. Three who pleaded guilty had bid at a March 2007 auction in Newfield, New Jersey, where an M.D. Sass representative also won liens.

U.S. District Judge Roger W. Titus sentenced Andrew Hamilton Williams, Jr., age 61, of Hollywood, Florida, [] to 150 years in prison followed by three years of supervised release(1) for his participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. On November 10, 2011, a federal jury convicted Williams on charges of conspiracy to commit wire fraud, wire fraud and conspiracy to commit money laundering.

***

“These individuals were responsible for shattering the dreams of countless hard working families during one of our country’s worst economic downturns,” said FBI Special Agent in Charge Richard A. McFeely. “The teamwork exhibited by all participating agencies throughout the joint investigation was exemplary.”

“Mortgage fraud is every bit as corrosive to American society as any street crime,” stated Eric Hylton, Special Agent in Charge, IRS-Criminal Investigation, Washington D.C. Field Office. “This type of fraud has far-reaching economic consequences and severely thwarts recovery from the foreclosure crisis, leaving homeowners in dire financial situations and financial institutions with uncollectible loans.”

According to evidence presented at the two week trial, beginning in 2005, Williams and his conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgage within five to seven years.

Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements, and electronic kiosks that sold goods and services.

To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, D.C., the Marriott Marquis Hotel in New York, New York, and the Regent Beverly Wilshire Hotel in Beverly Hills, California. Metro Dream Homes had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California.

According to trial testimony, Williams and his co-conspirators failed to advise investors that the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue. The defendants used the funds from later investors to pay the mortgages of earlier investors [ie. a 'Ponzi scheme'].

Evidence showed that MDH had not filed any federal income tax returns throughout its existence. The defendants also failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including Williams, [...].

A federal grand jury indicted a self-described "sovereign citizen" on charges he fudged property deeds to steal homes. 44-year-old Devitoe Farmer of Memphis faces three counts of theft of government property. U.S. Attorney Edward L. Stanton, III, said Farmer knowingly used fraudulent "quit-claim" deeds to essentially steal foreclosed properties assumed by the U.S. Department of Housing & Urban Development (HUD).

***

Farmer's indictment comes almost a year to the date since The Action News 5 Investigators caught him quit-claiming (or quick-claiming) the property deeds of seven Raleigh-Bartlett homes he does not own, according to Shelby County property records. [...] "I claim the unalienable (sic) rights that were guaranteed to us by the sovereign forefathers," said Farmer when confronted at one of the properties, 5181 Wax Wing Ln.

***

Tom Leatherwood, Shelby County's register of deeds, said Farmer quit-claimed the deeds by coming into the office and signing paperwork that shifted the properties from himself to himself, clouding the properties' titles. "If someone files fraudulent documents, that does create a cloud over someone's title and creates a real headache for the legitimate property owner," Leatherwood said.

Leatherwood also produced an affidavit of truth sworn by Farmer, declaring himself to be "...a natural, freeborn Sovereign, without subjects. I am neither subject to any entity anywhere, nor is any entity subject to me."

***

Records held at the Shelby County Criminal Court clerk's office showed Farmer bonded out on the charge. Prosecutors held the case to state in anticipation of a grand jury indictment.

Since that time, Farmer quit-claimed six more properties he does not own: [...].

NEAL LANDERS, 45, of Duluth, Georgia was arrested [...] on federal charges that LANDERS stole money from his clients after acting as the closing attorney for their real estate transactions.

***

United States Attorney Sally Quillian Yates said, “In real estate closings, lenders trust the attorneys who represent them to fairly and honestly conduct the closings and appropriately handle the funds with which they are entrusted. This defendant is charged with running a Ponzi scheme out of his law firm, often using the proceeds from real estate transactions for his own personal benefit rather than the business purpose for which they were intended.”

According to United States Attorney Yates, the charges, and other information presented in court: Beginning in 2007, LANDERS allegedly exploited his position as a closing attorney by misappropriating the funds from real estate transactions.

Specifically, LANDERS is charged with receiving money transfers into his escrow account from several real estate closings. Once the real estate transactions were complete, LANDERS was required to disburse these funds. However, according to the indictment, LANDERS delayed paying out the funds for weeks and sometimes for months. Rather than promptly disbursing the funds for the recently-closed properties, LANDERS used those funds to pay out the parties from previously completed real estate transactions (who should have been paid earlier).

LANDERS is also charged with transferring funds, in amounts that far exceeded any closing fees and/or costs, from his escrow account to a checking account. He then used that money to pay various personal expenses.

Finally, LANDERS is charged with making false statements on a loan application. The fraud alleged in the indictment totals more than $1.5 million.

Title Agent Gets 18 Months For Screwing Over Lenders, Insurance Underwriter Out Of $3.1M By Pocketing R/E Escrow Proceeds Meant For Mortgage Payoffs

From the Office of the U.S. Attorney (Baltimore, Maryland):

U.S. District Judge William N. Nickerson sentenced James Kevin Hughes, age 53, of Crownsville, Maryland [] to 18 months in prison followed by three years of supervised release for wire fraud arising from a scheme to defraud lenders and a title insurance company of approximately $3.1 million. Judge Nickerson also ordered Hughes to perform 300 hours of community service, pay restitution of $3,107,246, and forfeit his interest in a South Carolina condominium.

***

According to his plea agreement, Hughes and Stephen Troese owned Troese/Hughes, a title company in Greenbelt, Maryland. [...] In approximately 2006, the real estate industry started to slow. As business slowed down, it became the policy of Troese/Hughes to check with [escrow accountant and co-defendant Brenda] Lukenich as to when mortgage pay-off checks could be sent out, so that she could confirm that there were sufficient funds in the escrow account to cover the check. At this time, the mortgage payoff checks were stored in Federal Express envelopes under the credenza in Hughes’s office.

Hughes made efforts to fill the escrow shortage at Troese/Hughes by re-financing his own home twice and not paying off the prior mortgage, causing a loss of over $1 million to [title insurance underwriter] Chicago Title.

In addition, after an employee of Troese/Hughes re-financed his home, Hughes caused the prior mortgage on that home to not be paid off so that the money could be used to fill the escrow shortage, causing a loss to Chicago Title of approximately $217,000.

***

Eventually, there were not enough settlements to cover all of the shortages. Chicago Title received information that a mortgage had not been paid off and conducted a surprise audit of Troese/Prestige. The escrow account did not contain enough money to cover all of the outstanding mortgage pay-offs from Troese/Prestige. Chicago Title, as the title insurer, was forced to make the mortgage pay-offs, to pay off funds due to sellers from settlement, and to pay the recording fees. In total, the loss to Chicago Title stemming from the Troese/Prestige pay-offs was approximately $1.7 million.(1)

(1) Stephen J. Troese, Sr., age 72, of Davidsonville, Maryland, pleaded guilty and was sentenced to a year and a day in prison for his participation in the scheme. Brenda Lukenich, age 60, of Hughesville, Maryland pleaded guilty to mail fraud and is scheduled to be sentenced on April 10, 2012, at 9:30 a.m.

From an announcement from the Lawyers’ Committee for Civil Rights Under Law:(1)

The Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee) and pro bono counsel Davis Polk & Wardwell (Davis Polk) have filed their fifth lawsuit in a year targeting for-profit loan modification companies in Nassau County, New York, and the second such suit this month.

The most recently filed case, Squassoni v. Blackwell, was filed in New York Supreme Court in Nassau County on March 20 on behalf of 26 homeowners from New York and eight other states against two pairs of for-profit loan modification companies—the “United Solutions” group comprised of United Legal Solutions, Inc. (also known as United Solutions Corporation) and United Solutions Law Firm LLC and the “Consumer First” group comprised of Consumer First Corporation and Consumer First Law Group LLC, which was also sometimes called “Blackwell’s Attorneys.”

On March 20, 2012, the court granted plaintiffs’ emergency application to freeze certain of the defendants’ assets pending a determination of plaintiffs’ motion to attach those assets to secure a future judgment. The entities whose assets were restrained are Consumer First Law Group LLC, United Solutions Law Firm LLC, and Blackwell’s Attorneys LLC.

Plaintiffs allege that two so-called “law firms” run by Anthony J. Blackwell, an attorney not admitted to practice in the State of New York, falsely advertised “legal services” to vulnerable homeowners seeking help with much-needed mortgage modifications, extracting thousands of dollars in up-front payments from each homeowner.

Once paid, the firms then consistently failed to deliver results and abruptly stopped answering the homeowners’ phone calls and e-mails. The case seeks to recover money damages, including the illegal up-front fees paid by plaintiffs, and injunctive relief to put an end to the deceptive practices of the entities named as defendants and Mr. Blackwell. The Lawyers’ Committee and Davis Polk are representing the plaintiffs free of charge.

“This scam is particularly pernicious because it preys on the public’s trust in legal service providers,” said Jon Greenbaum, Lawyers’ Committee chief counsel and senior deputy director. “This case really presents two scams in one—an unlicensed attorney advertising for-profit mortgage modification services as legal services, and a for-profit mortgage modification scam that can be devastating to homeowners—causing them not only to lose the fees they paid, but in the worst cases, causing defaults that lead to foreclosure as a direct result of the scam.”

(1) The Lawyers' Committee for Civil Rights Under Law, a nonpartisan, nonprofit organization, was formed in 1963 at the request of President John F. Kennedy to involve the private bar in providing legal services to address racial discrimination.

A Palm Beach County family that lost its home in a 2010 foreclosure judgment is getting another shot at its case after the 4th District Court of Appeal said a lower court was premature in ruling for the bank.

Appeals court Judge Mark Polen said in the Wednesday decision that the judgment should not have occurred until the defendant's discovery was complete. The ruling sends the case back to the circuit court.

Homeowner attorney Brian Korte, of Korte & Wortman in West Palm Beach, said he had requested information about a trust that is said to hold Osorto's mortgage when the summary judgment was granted.

"The question is, does the trust even exist, and what we find is when we finally get a deposition taken is that no one has ever talked to the trust, they don't know what the address is, they don't know if the trust has employees," Korte said. "That's why trust cases have become difficult for the banks."

***

Korte said the law is clear that a summary judgment shouldn't be awarded when there is outstanding discovery,(1) but that straightforward rules don't always seem to apply in foreclosure cases.

An order granting summary judgment while there is an outstanding request for production of documents is premature and the appellate court should reverse and remand for discovery to be completed. Henderson v. Reyes, 702 So.2d 616, 616 (Fla. 3d DCA 1997).

However, if the incomplete discovery will not raise future disputed issues of material fact, summary judgment may be properly granted. Estate of Herrera v. Berlo Indus., Inc., 840 So.2d 272, 272 (Fla. 3d DCA 2003) (holding that summary judgment is proper where "future discovery would not yield any new information that the trial court either did not already know, or needed to make its ruling").

Here, a motion to compel, which was granted by the trial court, required Deutsche Bank to provide answers for requests seven, nine, ten, and thirteen of Osorto's requests for production, and to provide pinpoint cites for the pooling and servicing agreement. If the additional discovery would not yield new information, summary judgment would be proper.

The motion to compel required Deutsche Bank to actually answer seven, nine, ten, and thirteen, and to provide Osorto with: any agreement containing any obligation to repurchase the loan; originals or best copies of exhibits attached to the pooling and servicing agreement which affect this loan; originals or best copies of all documents concerning the repurchase or reassignment of the loan from the buyer or assignee back to the original seller or assignor or to any predecessor of the buyer or assignee; and originals or best copies of records concerning the transfer or assignment of the loan.

While Deutsche Bank already provided the pooling and servicing agreement, the information that may be included in the answers to requests for production seven, nine, ten, and thirteen could potentially be material. Where the information contained in outstanding discovery could create genuine issues of material fact, summary judgment would not be proper.

Therefore, the trial court erred in its entry of its order because summary judgment is considered premature until all discovery which may yield genuine issues of material fact is complete. As such, we reverse and remand this matter for further proceedings consistent with this opinion.

Homeowners do not lose their legal protections against being sued for debt after foreclosure just because they have refinanced a mortgage, the state Court of Appeals has ruled.

In a unanimous decision, the judges overturned a lower- court ruling that said Michael and Kelly Pasquan are liable for more than $1.9 million. That is the difference between what they owed on their mortgage and the value of the home when sold.

Appellate Judge Margaret Downie, writing for the court, said that's not the way the law works, and not what legislators had in mind when they agreed to give certain protections to homeowners.

Court records show the couple bought a 4,000-square-foot home in Paradise Valley in 2003 for $935,000. They paid $335,000 in cash and got a $600,000 loan. The following year, they obtained a $1.6 million loan from a different lender. Those funds paid off their earlier loan, funded demolition of most of the existing home and construction of an 11,500-square-foot home in its place.

The couple subsequently borrowed an additional $500,000 from the same lender, with Michael Pasquin saying all those funds were for construction expenses. Then, in 2006, the couple got a $3.4 million loan serviced by Helvetica Servicing Inc. It was secured by a new deed of trust against the company, allowing it to repossess the property in the event of default.

Pasquan said most of that went to repay the earlier mortgage, with other funds used to repay a construction loan from Pasquan's father, with other funds for closing costs, interest and reserves, with some cash for the couple.

When the couple defaulted, Helvetica said it was owed more than $3.6 million. Helvetica purchased the property with a $400,000 credit bid at a sheriff's sale. A trial judge, after hearing arguments, eventually concluded the couple owed $1.9 million. Pasquan, now divorced, appealed.

Downie pointed out the Legislature enacted an "anti-deficiency" statute in 1971 to protect certain borrowers from remaining on the financial hook if the foreclosure value of their home was not enough to cover what was owed. "Anti-deficiency protection reflects a legislative policy decision to place the risk of inadequate security on lenders rather than borrowers," she wrote.

Downie said the idea is to discourage lenders from over-valuing real property "by requiring them to look solely to the collateral for recovery in the event of foreclosure."

Not everyone is eligible. Anti-deficiency protection is available only when the funds are used to buy either a single one-family or two-family dwelling. And the property cannot be larger than 2 1/2 acres.

The protection is available only when the mortgage proceeds are used to buy or build a home, making it what the law calls a "purchase money" loan.

Attorneys for Helvetica argued that once the couple refinanced the original purchase money loan, the new loan did not fit that definition. And that meant it was no longer subject to the anti-deficiency protections, they said.

Downie said that's not the case. "A change in the lender's identity does not, standing alone, alter the nature of the underlying purchase money debt," she wrote. Downie added that lawmakers clearly wanted to abolish the personal liability of those who provide a deed of trust allowing repossession.

The judge said the reason for disallowing deficiency judgments goes beyond keeping lenders from overvaluing the property in deciding how much to lend. She said the law is also designed to prevent financial ruin of homeowners who already have lost their homes. And that is all the more important in distressed economic climates when people frequently refinance their homes, Downie added.

MPR News received a tip about a complicated story involving an attorney, a judge and the state's foreclosure laws. U.S. District Judge Patrick J. Schiltz has taken the unusual step of sanctioning Minneapolis attorney William Butler for filing what the judge calls frivolous show-me-the-note actions. That's where a homeowner facing foreclosure argues that because the mortgage and note are held by different entities, the home's mortgage or foreclosure on that mortgage is invalid.

Separating the note from the mortgage contributed to the practice of mortgage securitization, one culprit in the housing bubble and crash. Some courts in other states have ruled in favor of homeowners in cases like these. But here, Judge Schiltz says it's been established under Minnesota law (he references Jackson v. Mortgage Electronic Registration Systems, Inc.) that the entity that holds the mortgage can foreclose on the mortgage even if that entity does not also hold the note. Showing the note is not necessary under foreclosure by advertisement, which is how most of Minnesota's foreclosures are processed.

Butler, of Butler Liberty Law, LLC, brought nearly 30 of such cases on behalf of several hundred people and apparently never won. Among other things, Judge Schiltz alleges Butler solicited homeowners facing foreclosure for frivolous cases and then "judge shopped" for sympathetic judges while his cases dragged on for months, allowing him to collect fees from clients and allowing those clients to continue living in their homes rent-free.

As punishment, the court ordered Butler to pay a $50,000 penalty and cover attorneys fees for some of the largest firms representing clients like GMAC Mortgage, Deutsche Bank, The Bank of New York and others. People familiar with the case expect these penalties to rise well into the six figures. Butler also risks losing his license to practice law.

Recent Court Ruling "Not Something The State Of Utah Can Let Pass" As Federal Judge Allows For In-State Foreclosures To Be Governed By Texas Law

In Salt Lake City, Utah, The Salt Lake Tribune reports:

The Attorney General’s Office is seeking to intervene in a lawsuit in which a federal judge has ruled that Texas law governs foreclosures carried out by a unit of Bank of America in Utah.

The Feb. 8 ruling by U.S. District Judge Ted Stewart "is not something the State of Utah can let pass," Assistant Attorney General Jerrold Jensen wrote in seeking to intervene in the lawsuit.

Federal judges in Utah have split over the question of whether BofA’s foreclosure arm, ReconTrust, may have violated state law in thousands of actions taken in recent years against Utah homeowners.

Stewart ruled that because ReconTrust is headquartered in Texas, where it carries out many of its foreclosure functions, the National Bank Act says the bank’s actions are governed by that state’s laws.

"Texas does not pass banking laws for Utah," Jensen wrote. "And Utah does not pass banking laws for Texas." Bank of America representatives did not respond to an email seeking comment on the state’s actions.

Stewart’s ruling dismissed a proposed class-action lawsuit, which claimed that in carrying out foreclosures in Utah under its own name, ReconTrust violated a state law that says only Utah attorneys or title companies can legally foreclose on behalf of a mortgage note holder.

Abraham Bates, one of the attorneys representing homeowners, said that perhaps 10,000 Utah homeowners were foreclosed on by ReconTrust in recent years. Bates has filed a motion asking Stewart to reconsider his decision and also wants the judge to allow an amended lawsuit to go forward. If Stewart does not reconsider his opinion, Bates said the case could be paired with another that is being appealed to the 10th Circuit Court of Appeals in Denver.

That case involves a decision by U.S. District Judge Bruce Jenkins who ruled that ReconTrust was governed by Utah laws when foreclosing in this state. Because of the split over the issues among federal judges in Utah, Bates and attorneys for ReconTrust recently agreed to halt proceedings and take Jenkins’ ruling directly to the appeals court. "It’s time to take this to the 10th Circuit and have it resolved," Bates said.

Sunday, April 01, 2012

Feds Continue Applying The Squeeze On Sale Leaseback-Peddling Ripoffs As Head Of Granite State Equity Stripping Racket Feels The Pinch

In Concord, New Hampshire, the Nashua Telegraph reports:

A federal grand jury has indicted a former Nashua man whom investigators say was the ringleader of a mortgage scheme that duped financially strapped homeowners out of their properties, which were eventually lost to foreclosure.

Michael Prieto will make his first appearance in U.S. District Court in Concord on Tuesday afternoon to answer charges of mail fraud and money laundering, according to federal court documents.

The indictments allege Prieto coordinated the mortgage scheme from offices in Manchester, controlling a number of employees and agents involved in the scam, and that he identified struggling homeowners to target. Prosecutors say dozens of New Hampshire homeowners, including at least one in Nashua, were targeted by the conspiracy.

The scheme was part of a long-running criminal conspiracy whose members defrauded lenders and homeowners across New Hampshire, Assistant U.S. Attorney Michael Gunnison told Judge Steven McAuliffe when another defendant, Richard Winefield, was sentenced. Two other people – Walter Bressler and Sadie Stanhope Ng – have also pleaded guilty and are scheduled to be sentenced in April, according to court documents.

Prieto has said in previous interviews that there was no scheme, but rather a refinancing program intended to help struggling homeowners, which would have worked if they paid their agreed-upon rent.

“The agreement and the program … was not a scam,” Prieto previously told The Telegraph. “It was designed for its purpose, which was helping people pay off their debts, giving them breathing room, giving them an opportunity to stay in their homes for two years.” Prieto said it was a genuine effort to help people with debts. He noted, as have prosecutors, that they also paid off other creditors.

Yet prosecutors claim that Prieto and others sought out homeowners who were having trouble making ends meet and offered to buy the property, take over the loan and rent the home back to homeowners. They also contracted to let the homeowner buy the home back later, at a higher price, although no homeowner was ever able to do so, Gunnison said.

Meanwhile, and without the homeowners knowing it, Gunnison said, the other conspirators were flipping the homes, selling them at inflated prices to bogus straw buyers who had taken out much larger loans. Those larger loans paid off the original mortgages and were then defaulted on while the difference, often tens of thousands of dollars, was pocketed, according to court documents. The indictments accuse Prieto of overseeing the entire enterprise.(1)

Oregon Federal Judge Orders F'closure Controversy Referral To State High Court For Final Resolution, Despite Objections From Obviously-Frightened MERS

In Portland, Oregon, The Oregonian reports:

With Oregon's state and federal courts singing a variety of different tunes on the mortgage industry's controversial nationwide document-registration system, someone will finally ask the state Supreme Court to step in. If the high court gives the system a thumbs down, it could throw a wrench into thousands of pending foreclosures in Oregon and potentially upend thousands more already completed.

An order filed this week in the U.S. District Court in Portland said that court's chief judge will certify questions for the Supreme Court. The Supreme Court has to formally accept the questions, and it has the latitude to reject or even reword them. If the seven justices do take on the issue, their decision could bring an end to a series of differing rulings on whether the industry's Mortgage Electronic Registration Systems, or MERS, meets the requirements of state law when it comes to property documentation.

That conflicting legal history makes it likely to get the Supreme Court go-ahead, said Willamette University law professor Jeff Dobbins. "It's such a significant issue," he said. "Unless they see something in the case that makes them think it's not right, I think the betting is probably reasonable that they'll go ahead and consider the question."

***

Some courts in Oregon have upheld MERS, while others have blocked the foreclosure proceedings. The conflicting rulings have resulted in a race to the Supreme Court for a definite ruling, or a fix from the legislature.

In the five cases the District Court has flagged for high court consideration -- like many others involving MERS -- borrowers argued that a lender can't foreclose out of court unless every change in control of the loan was recorded. The court will have to determine whether MERS qualifies as a loan beneficiary under state law and whether it has met state recording standards.

"It has undermined the whole basis of law that our country was founded on, in establishing a chain of title," said John Bowles, a partner at the Bowles Fernandez law firm in Lake Oswego. "MERS is a privately owned mechanism, owned by the principal industry players, that have chosen to subvert the whole system of recording."

MERS said Thursday it was still waiting to hear details of the court's order. "We do not have the specifics yet from the court, but we look forward to the opportunity to present the seven honorable justices of the Oregon Supreme Court with the ample evidence of the benefits and legality of the MERS model," spokeswoman Janis Smith said in a statement.

Often, when a federal court decides to send questions to the state's high court, it has the agreement of both sides. In these five cases, the court moved forward with certification over the objections of MERS' representatives.

Kelly L. Harpster, a Lake Oswego attorney who represents homeowners in other MERS cases, said it's important for the justices to let everyone know where things stand so they can move forward. "Until there is a decision from the Supreme Court, we're going to get these conflicting results," she said. If the court rules against MERS, lenders could still pursue foreclosure through the courts. But that procedure is more costly and takes longer.

It's not clear how a ruling against MERS could affect the thousands of foreclosures that have already been completed. According to the data firm CoreLogic, some 10,000 foreclosures have been completed in Oregon in a 12-month period though last month.

Merscorp Inc., operator of the electronic-registration system for about half of all U.S. home mortgages, got a court to set aside a bankruptcy judge’s opinion criticizing its right to transfer the mortgages among members.

“The issue of whether MERS had authority to assign the mortgage was no longer before the bankruptcy court,” Seybert wrote. “There was no longer a live case or controversy.”

***

“I thought it was a poor decision because it was decided only on procedural grounds,” George E. Bassias, a lawyer for Agard in Queens, New York, said of Seybert’s ruling in a phone interview today. “In my opinion she’s wrong on the procedure too.”

***

[Bankruptcy Judge] Grossman then [said] that Select Portfolio and U.S. Bancorp, which had been assigned the mortgage by MERS, wouldn’t have been given the relief had a state court not already granted a foreclosure judgment. That was because MERS’s “nominee” status didn’t give it the authority to assign mortgages, Grossman said.

Seybert said that that part of the order “constitutes an unconstitutional advisory opinion and must be vacated.”

“What the judge wrote is dicta,” Bassias said, referring to Grossman. “Dicta means it’s not a binding decision. He’s specifying everything MERS does that’s wrong. This judge did not address whether what MERS does is right or wrong.” Bassias said he didn’t oppose MERS’s appeal.

“We have long believed that those who sought to use the In re Agard decision against MERS were wrong to do so,” Janis Smith, a Merscorp spokeswoman, said in a statement. “Any future challenges to MERS’ business model will have to be done without citing to Judge Grossman’s now vacated opinion.”(1)

(1) As Judge Seybert correctly points out, that portion of the Agard case that criticized MERS was, in fact, nothing more than an advisory opinion. As such, and since that portion of Judge Grossman's opinion was not binding on any other court anyway, there is nothing that stops any other litigant or judge in any other case from any jurisdiction from citing to Judge Grossman's original opinion in Agard for the persuasive value of Judge Grossman's logic applied in his analysis, contrary to the statements of the presumably well-paid MERS' flack. What this flack also fails to mention is that the portion of Judge Grossman's opinion that was vacated was not done so on substantive grounds (ie. Judge Seybert didn't actually disagree with anything Judge Grossman said, but merely disagreed with the fact that he said it in light of the fact that nothing he said was necessary to reach his ruling in that particular case - remember, Judge Grossman actually rejected the homeowners's challenge to MERS).

Although Justice Page wrote in dissent in a case involving a Minnesota statute, his concerns apply to numerous cases pending before me. [...] Justice Page wrote in dissent, but his views are persuasive.

By the way, in quoting from a dissenting opinion from an out-of-state court ruling that has no binding legal effect in Oregon, Judge Panner's action illustrates at least one example of why appellate-level judges (ie. Justice Page) spend their time writing dissenting opinions. The fact that none of Justice Page's colleagues on the Minnesota Supreme Court shared his view in the 6-1 ruling in Jackson v. Mortgage Electronic Registration Systems, Inc. didn't mean there wouldn't be other judges from around the country (ie. Judge Panner, among possibly many others) who would find his observations and concerns useful when considering subsequent cases.

File this one under "nice try." The Minnesota Court of Appeals [] rejected a Grasston man's attempt to stop foreclosure proceedings against him because he listed himself as "single" on the mortgage application even though he was married.

Thomas Graikowski of Grasston refinanced his mortgage in 2006, two days after he married a woman who didn't know about the mortgage, didn't attend the closing, and didn't sign the loan application.

He defaulted on the $170,000 loan a year later, the marriage ended a year after that, and two years after the divorce, the mortgage company foreclosed on both of them. He attempted to have the mortgage declared void because his then-wife didn't sign it.

Under Minnesota law, the Appeals Court said, the Graikowski's mortgage is void because it lacked his wife's signature, but it said the law can't be used by someone who signed a mortgage to avoid repaying it.

Not that it hasn't been tried before. The court cited a Minnesota Supreme Court case in which a Buhl man, Stanley Bozich, declared himself "single" on a mortgage application even though he was married. His wife died and he remarried, then he attempted to cancel the mortgage on the basis that his new wife didn't sign it. The state Supreme Court had a word for that: "fraud."

In [the current] ruling, the Court of Appeals said Mr. Graikowski misrepresented his marital status either intentionally or unintentionally, and can't walk away from the obligation because of it.(1)

(1) The Minnesota Appeals Court explained why it refused to void the mortgage in this case, despite the fact that the wife neither signed the mortgage, nor even knew of its existence:

Despite the plain language of section 507.02, "even though great importance is attached to the homestead right, under certain circumstances a [nonsigning spouse] may be estopped from denying a sale of the homestead even if the statutory requirements are not met." Dvorak, 285 N.W.2d at 677-78 (requiring the presence of three factors for successful application of equitable estoppel: "[1] the nonsigning spouse's consent and full knowledge of the transaction, [2] retention of benefits, and [3] delivery of possession to the grantee, who typically took possession and made valuable improvements"); see St. Denis v. Mullen, 157 Minn. 266, 270-71, 196 N.W. 258, 259-60 (1923) (estopping nonsigning wife from challenging conveyance when wife and husband were separated for 32 years, wife knew husband lived with another woman and knew husband died, wife failed to timely contest husband's conveyance to another woman, and an innocent purchaser was involved).

In Dvorak, the supreme court stated that "detrimental reliance by the party seeking relief is critical to a finding of estoppel" and declined to estop the nonsigning spouse from challenging the validity of the conveyance under section 507.02 because the party seeking relief could not show detrimental reliance. Dvorak, 285 N.W.2d at 678; cf. Karnitz v. Wells Fargo Bank, N.A., 572 F.3d 572, 574-75 (8th Cir. 2009) (noting Dvorak factors and estopping both signing and nonsigning spouses from challenging the validity of their mortgage because nonsigning spouse knew about and intended to mortgage her homestead, retained the benefit of the mortgage, and lender significantly changed its position by lending couple over $130,000).

In this case, the parties do not dispute that the property was Graikowski's homestead and that he was married to Coleman when he alone signed the mortgage conveying a property interest to HSBC. Under the plain language of section 507.02, Graikowski's mortgage is void because it lacked Coleman's signature. But this does not end our analysis, because no Minnesota state court case supports the application of section 507.02 to void a conveyance solely to protect a signing spouse. To the contrary, the Minnesota Supreme Court has estopped a signing spouse from challenging the validity of a conveyance under section 507.02 in Bozich v. First State Bank of Buhl, 150 Minn. 241, 184 N.W. 1021 (1921).

Bozich, who was married to Helda, "represented to the bank in his application for the loan, and in response to a direct question, that he was a single man, and it was so recited in the mortgage and in the acknowledgment." Bozich, 150 Minn. at 242, 184 N.W. at 1021. The bank "believed and relied upon such representation and by it was induced to make the loan and take the mortgage [on Bozich's homestead]." Id. The supreme court stated that Bozich knew that his wife should sign. Whether he knew the full legal effect of a failure to sign when the mortgage was upon the homestead is not apparent. He knew that the bank supposed it was getting a good lien and his representation was necessarily fraudulent. Id. After Helda died, Bozich and his new wife brought an action to cancel the mortgage on the basis that Helda did not join it. The district court said:

Stanley Bozich unquestionably perpetrated a fraud on the defendant. The purpose of estoppel is to prevent fraud resulting in injustice. If any state of facts justifies the application of the doctrine of estoppel it ought to be applied here. Stanley obtained $3,000 from the defendant by falsely representing that he was a single man. He now asks the court to release the mortgaged property from the lien of the mortgage without requiring him to pay the loan. His wife is dead. No one will be benefited by such decree but the party who perpetrated the fraud. The courts cannot be used for such a purpose. Id. at 242-43, 184 N.W. at 1021 (quotation omitted).

The supreme court agreed with the district court's result and said:

Many cases, speaking directly to the facts presented and with emphasis upon the importance of preserving unimpaired the homestead right, have used language from which on casual view an inference might be drawn that an estoppel cannot be invoked at all when a spouse fails to sign. Usually in these cases the estoppel was predicated upon covenants in the conveyance. . . . There are cases holding or implying that an estoppel may be invoked from facts apart from the covenants. . . . The defendant does not predicate the estoppel which it invokes upon the covenants in the mortgage. Upon inquiry made Bozich fraudulently represented that he was unmarried and by his misrepresentation induced the defendant to part with $3,000 upon the faith of the proffered security. The fraudulent misrepresentation is the basis of the estoppel claimed. Id. at 243, 184 N.W. at 1021-22 (citations omitted).

The supreme court held that:

[W]here as here the mortgagor, a married man, procures a loan on his homestead by fraudulently representing that he is unmarried, and afterwards his wife dies, ownership remaining in the meantime unchanged, the situation then being that a mortgage executed by himself alone is valid, he will not be heard to say in a court of equity that the mortgage which he made when his wife was living was void and will be held estopped to assert its invalidity. Id. at 243-44, 184 N.W. at 1022.

Graikowski argues that nothing in the record suggests that he knew that his wife needed to sign the mortgage, that he knew that the documents he signed at closing indicated that he was single, or that he intended to perpetrate a fraud. He argues that at all times he acted in good faith. His arguments are unavailing. "In the absence of fraud or misrepresentation, a person who signs a contract may not avoid it on the ground that he did not read it or thought its terms to be different." Gartner v. Eikill, 319 N.W.2d 397, 398 (Minn. 1982); see Bus. Bank v. Hanson, 769 N.W.2d 285, 288 (Minn. 2009) (indicating that a mortgage is a contract).

Like the supreme court in Bozich, we are unpersuaded by Graikowski's claim that the mortgage, which he executed two days after his marriage to Coleman, is void because she did not sign it. Although on January 25, 2006, Graikowski's response to the loan officer's direct inquiry about his marital status was true, Graikowski signed the loan application on June 26, after his marriage to Coleman. In the loan application, Graikowski represented that the information provided was true and correct "as of the date set forth opposite [his] signature[, January 26, 2006,] and that any intentional or negligent misrepresentation of [the] information contained in [the] application may result in civil liability."

Moreover, Graikowski represented in the application that "the Lender . . . may continuously rely on the information contained in the application, and I am obligated to amend and/or supplement the information provided in this application if any of the material facts that I have represented herein should change prior to closing of the Loan." (Emphasis added.)

When Graikowski signed the loan application on June 26, 2006, the information contained in it—that he was a "[s]ingle man"—was false. Graikowski was obligated to correct that information and did not do so. Based on Graikowski's false representation about his marital status, HSBC loaned him $170,100, believing that its loan would be secured by a first mortgage against his homestead. Graikowski's assertion that he did not read the application at the closing on June 26 has no legal significance, and the district court properly concluded that it does not create a genuine issue of material fact.

The equitable estoppel factors articulated in Dvorak are not applicable here because, unlike Dvorak, HSBC seeks to estop only a signing spouse from challenging the validity of a conveyance. In Dvorak, a purchaser sought to estop a nonsigning wife from challenging the validity of a contract for the sale of her homestead. Dvorak, 285 N.W.2d at 677. In this case, albeit through marriage dissolution, Coleman, the nonsigning spouse, claims no interest in the homestead.

We conclude that Graikowski, as the signing spouse, is estopped from challenging the validity of his mortgage because (1) he procured the conveyance through an intentional or negligent misrepresentation of fact, (2) the lender relied on the misrepresentation to its detriment, and (3) he retained the benefits.

CBC News: Betrayal of Trust (A CBC investigation reveals how lawyers across Canada have misappropriated and mishandled clients money, to the tune of tens of millions of dollars, or sometimes even charging vulnerable people top dollar for shoddy services)

Send Any Comments To:

Special Thanks To:

The information, reporting, and commentary contained in The Home Equity Theft Reporter are intended solely to provide general information on The Home Equity Theft issues occurring throughout the United States and are based on information sources deemed reliable by The Home Equity Theft Reporter.
This weblog is not intended, nor should it be regarded by the reader, as a solicitation for business. The posts on this site are presented as general research, information and personal opinion of The Home Equity Theft Reporter and are expressly not intended, shall not constitute, and should not be regarded by anyone, as legal advice.
No claims, promises or guarantees about the accuracy, completeness or adequacy of the information linked to or from this weblog are contained herein.